FORT WORTH, TX, Aug. 27, 2018 /CNW/ - Oracle Oil and Gas LLC
(Oracle Oil and Gas), a wholly owned subsidiary of Oracle
Energy Corp. ("Oracle" or the "Company ") (TSX.V:
OEC) (Frankfurt: O2E), is pleased to provide an update on the
acquisition of Texas Eagle Ford assets described in the
June 19 news release.
The Assets
Oracle has completed initial payments, each for US$500,000, on 2 assets in the Eagle Ford.
The first asset is the subject of a Purchase and Sale Agreement
dated June 7, 2018 with an arm's
length private limited liability company qualified to do business
in Texas whereby Oracle is to
acquire specific infrastructure and oil and gas mineral acreage
which are held by production (the "HBP Assets"), located in
South Texas. The productive
formations which are present throughout the area are the
Buda (the deepest), the Eagle Ford
(upper and lower) and the Austin Chalk (the shallowest). The HBP
Assets include 2547 net acres of mineral lease rights, of which 613
acres are to the base of the Buda,
640 acres are to the base of the Eagle Ford and 1294 acres are to
the base of the Austin Chalk. The HBP Assets also include; 7
producing wells, 6 shut in wells, a water disposal well and the
production infrastructure situated on the properties. The July
production from the HBP Assets was 1273 barrels of oil and 5020
thousand cubic feet of gas. There is opportunity with the existing
wells for workovers to significantly increase production. Pursuant
to the terms of the Purchase Agreement the Company will acquire a
100% working interest and a 74% net revenue interest. The total
consideration to be paid by the Company for the Assets is
US$5,000,000 (the "Purchase Price")
payable by September 28, 2018 (the
"Closing Date") subject the payment of a 10% down payment
(US$500,000) by July 1, 2018, which was completed on June 28.
The second asset is the subject of an Option Agreement, dated
May 19, 2018, with four arm's length
private entities doing business in Texas (collectively the "Optionors") which own
acreage adjoining the HBP Assets (the Adjoining Lands). This Option
Agreement will result a total (including the HBP acreage) of 6310
net acres of which 4923 acres are for all depths, 613 acres are to
the base of the Buda, 640 acres
are to the base of the Eagle Ford and 134 acres to the base of the
Austin Chalk. In accordance with this agreement, Oracle has paid
the option payment of US$500,000 and
is required to sign an Oil and Gas Lease and a Surface Lease and to
pay the balance for the leases by September
28, 2018. This full consideration will earn; a working
interest of 100%, a 3 year right to drill, an option to extend the
lease for another 2 years and the subsequent right to retain the
productive acreage by payment of a 25% royalty on production. The
lease includes a requirement to drill 2 wells in the first year of
the lease.
Oracle is focused on exploiting the Lower Eagle Ford, in
addition it is aware of the production potential in this acreage in
the Buda and the Austin Chalk
formations.
In addition to the 2 Agreements described above and as reported
in the June 19 press release, Oracle
has also entered into an agreement, dated May 1, 2018, with a private Texas entity in respect to obtaining oil and
gas rights relating to "Additional Lands" which are adjoining the
HBP Assets and the Adjoining Lands.
The NI 51-101 Report
Oracle commissioned RPS Energy Limited (RPS) an independent
qualified evaluator, to prepare a report of the oil and gas
recovery potential from the Lower Eagle Ford in the proposed
acreage. Based on the results of the evaluation conducted by RPS,
with an effective date of May 1,
2018, Oracle expects commercially recoverable volumes of 31
million barrels of oil and 59 billion cubic feet of gas from the
Lower Eagle Ford formation in the lease area. These volumes are
currently classified as 2C Contingent Resources in the Development
Pending sub-class. The 2C classification indicates there is a 50%
probability the recovered volumes will exceed these estimates and a
50% probability that the recovered volumes will be less that these
estimates. The un-risked, after tax, net present value, discounted
at 10%, for these assets is $329 MM
US. The project development, based on a conceptual development
plan, would begin with drilling commencing in early 2019 and
completing in early 2023. First production would occur the first
half of 2019. The development plan calls for 50 horizontal, long
lateral, wells and a development cost of $358 MM US. There is uncertainty that it will be
commercially viable to produce any portion of the resources.
With respect to the recoverable resources evaluated in the RPS
report, Oracle notes that the specific contingencies which prevent
the classification of the resources as reserves are related to
obtaining the necessary financing to develop the resource; and that
the technical risks associated with the recovery of the resources
are minimal, as there are existing producing analog wells
surrounding and within the lease area. The significant positive
factors relevant to the estimate are the potential to bring
undrilled lands, with proven production potential in the subject
producing formation, on production within a very short time frame
by application of modern horizontal well drilling and completion
practices. The significant negative factors relevant to the
estimate relate to the recovery technology being primary recovery
by fluid expansion drive and the potential variability in long term
production rates due to unpredictable variations in oil shale
quality within the license area.
Funding
The forecast spending on the HBP assets and the Adjoining Lands
for the first 6 months is $18.7
million US of which $10.3
million US is for land acquisition and A&G with the
remaining $8.4 million for the
drilling of an Eagle Ford long lateral horizontal well.
Oracle's funding plan for developing this program includes an
equity raise in Canada for the
land acquisition and a structured debt raise in the US for drilling
funds. Oracle is discussing the Canadian equity raise with several
Canadian institutions and expects to appoint a lead banker in
August. Oracle has also retained Petrie Partners Securities, LLC
(with its affiliate, Petrie Partners, LLC, "Petrie"), a preeminent
boutique investment banking firm to the oil and gas industry, to
assist in raising development capital for the drilling portion of
the Eagle Ford Development Project.
Resumption of Trading
The Company expects that its shares will resume trading on the
TSX Venture Exchange within the next few days.
Chairman Comments
Chairman and CEO, Darrell McKenna
commented, "Oracle's contingent resource evaluation is a
critical step in planning for the exploitation of and making the
case for our Eagle Ford assets. The report supports and bolsters
the magnitude and scale of Oracle's opportunity. Furthermore, the
report verifies our views of ultimate recoveries and confirms the
economics. We are confident that we are in the right basin - the
Eagle Ford - and are taking the necessary steps to bring value to
our stakeholders. Oracle is bullish on the Eagle Ford and intends
to continue growing a position in this resource play. We believe
the application of 'cutting edge' technology to drilling,
completing and operating the Eagle Ford will provide superior
returns to our shareholders. We are excited about the partnership
with Petrie and view them as the ideal advisor to help secure funds
for Oracle's long-term strategic plan to execute on its exciting
Eagle Ford drilling opportunity."
The acquisition of the acreage HBP Acreage, the Additional Lands
and the Adjoining Lands is subject to the receipt of approval from
the TSX Venture Exchange.
About Petrie
Petrie is a boutique investment banking firm offering financial
advisory services to the oil and gas industry. Petrie provides
specialized advice on mergers, divestitures and acquisitions and
private placements.
The firm was formed in 2011 by senior bankers formerly with Bank
of America Merrill Lynch and Petrie
Parkman & Co., an investment bank that built a
reputation as a trusted advisor to energy clients during the nearly
two decades leading up to its merger into Merrill Lynch in 2006.
Through tenure with Petrie Parkman,
Merrill Lynch and Bank of America Merrill Lynch, the senior members
of the Petrie team bring to bear an average of more than 25 years
of energy investment banking experience, including over 300 energy
M&A and capital raising transactions representing over
$350 billion of aggregate
consideration.
ON BEHALF OF THE BOARD OF DIRECTORS.
Darrell McKenna; Chairman and
CEO
About Oracle Energy Corp.
Oracle Energy Corp.(TSX.V: OEC) (Frankfurt: O2E) is a junior oil
and gas development company focused on acquiring development assets
in North America and with current
focus on the Texas Eagle Ford.
Neither TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release. Forward-looking statements in this
release are made pursuant to the 'safe harbour' provisions of the
Private Securities Litigation Reform act of 1995. Investors are
cautioned that such forward-looking statements involve risks and
uncertainties.
SOURCE Oracle Energy Corp.
